Quiet title may not be the answer for everyone but it can definitely work for some.

Quiet title may not be the answer for everyone but it can definitely work for some.


Posted on January 17, 2011 by Foreclosureblues

How accurate are property records?
By Tom Harvey
The Salt Lake Tribune
Published: January 16, 2011 04:41PM
Updated: January 16, 2011 01:01AM

Chris Detrick | The Salt Lake Tribune

Walter Keane poses for a portrait at his office Friday January 7, 2011. Keane has filed lawsuit that resulted in homeowners getting title to their property even if they owed someone money because of flaws introduced into the nation’s property recording system by an entity created by the Mortgage Bankers Association.
A Utah court case in which the owner of a Draper townhouse got clear title to the property, even though he still owed $132,000 on it, raises new legal and financial questions about a property-records database created by mortgage bankers.
The award of a title free of liens means that whoever owns the promissory note on the Draper property — likely a group of faraway investors — no longer has the right to foreclose to collect on a delinquent loan. Indeed, the townhouse owner has sold the property and kept the money. Those who own the promissory note probably don’t even know what occurred.
Decisions such as the one 3rd District Judge Glen Iwasaki handed down in the Draper case could have a big impact as the state wends its way through hundreds of lawsuits involving foreclosures, loans on properties for more than they’re worth and predatory lending practices that led Utahns to lose their homes as the real-estate bubble burst.

Quiet title • Last year, the owner of the Draper property contacted attorney Walter T. Keane to help him deal with lenders, though Keane won’t say what the problem was and the owner declined an interview request.
Keane filed what’s called a “quiet title action,” a lawsuit in which the owner seeks clear title to a property free of liens by lenders or others.
In Utah, when you take out a mortgage loan to buy a home, you sign a promissory note held by the lender and a deed of trust that is recorded at the county recorder’s office. The promissory note gives the holder the right to collect payments on the loan. The recording of the deed of trust gives the lender the right to foreclose on the property if you default on the loan.
A trustee appointed by the lender also is recorded with the county and actually holds legal title to your property subject to the conditions of the trust deed.
The lawsuit over the title to the townhouse named Garbett Mortgage and Citibank FSB as the holders of promissory notes as recorded on trust deeds filed with the recorder’s office. Integrated Title Services was listed as trustee of the Garbett Mortgage trust deed, while First American Title was the trustee of the CitiBank trust deed.

Trust deed tag-along • But there also was another entity listed on the trust deeds called the Mortgage Electronic Registration Systems (MERS). The Mortgage Bankers Association, the Washington, D.C.-based trade group that represents major mortgage lenders, created MERS in the mid-1990s.
MERS is a database where promissory note owners are recorded, with MERS itself then listed on trust deeds at county recorder offices as the “beneficiary” of the note instead of the real lenders or note owners.
The new arrangement greased the way for mortgages to be packaged together and sold to investors who were relieved of the need under the traditional system to record the true owner of the promissory notes and to pay the county recording fees, which average around $35. Attorneys charge MERS is largely an instrument to avoid paying fees every time a promissory note is sold and resold and eventually packaged with others and owned by group of investors.
During the latter part of the real-estate boom, hundreds of thousands of subprime loans were packaged and sold using the MERS system. MERS has registered about 31 million loans, the company’s chief executive said in congressional testimony in November. CEO R.K. Arnold also said in a 2009 deposition that the system had saved its members an estimated $2.4 billion that would have gone to county governments.

Who’s the beneficiary? • Under the state’s quiet title laws, Keane said he did not have to name MERS or serve it legal papers in the lawsuit because it was not the legal owner of title to the property. Those were title companies. In addition, attorneys contend, MERS cannot be the “beneficiary” or holder of the promissory note because it readily has admitted it has no financial interest in any notes or mortgages.
Normally, a trustee named in a trust deed has a legal duty in Utah to the entity that holds the promissory note and for fair dealing with the homeowner. But in the townhouse case, First American Title filed a response to the quiet title action saying that it had no idea who had the right to collect payments on the promissory note, nor did it admit to knowing any other basic information about the property.
“The fact of the matter is First American Title doesn’t know who the beneficiary of the trust deed is and basically they disavow any interest in it,” Keane said. “It’s an acknowledgement [the recording system on this property is] a fiction, that they don’t have any real interest in it.”
Garbett Mortgage also told the court it no longer held an interest in the property. Integrated Title never filed a response to the lawsuit but did withdraw as a trustee with the Salt Lake County Recorder’s Office.
“Considering the owner of the property [the title companies who were trustees] failed to dispute the matter, and further considering that the original lender claims no further interest, the court nullified the trust deeds prior to setting any type of trial date,” Keane said.
So in the four months that the process took, the owner was able to gain title and deny the owners of his loan the ability to foreclose on the property for nonpayment. That means the promissory note owned by investors may be worth far less than they paid for it because it is no longer backed by an asset.

Record reliability • MERS spokeswoman Karmelo Lejarde said MERS actually added reliability to the system of county recording offices.
“Prior to the creation of MERS [when servicers routinely held the mortgage lien for the note owner], the information in the public land records was not accurate due to delays in recording assignments or missing assignments that never got recorded,” she said in e-mail that appears to be a boilerplate response to questions about MERS’ role in the nation’s property registration system.
“With the MERS System, mortgage data is more accurate and title information more reliable. The MERS process creates accountability and transparency, helps keep costs low, reduces the risk of errors in record keeping and makes it easier to keep track of the lien if a loan is sold to other banks and investors.”
Gary Ott, the elected Salt Lake County recorder for the past 10 years, disagrees. He characterizes his office as a neutral party that permanently safeguards records, all of which are available for public inspection. In the past, parties were able to record each transaction or lien involving a property so a clear picture emerges of the title history of a property, Ott said, adding that with computerization, the recording is now nearly instantaneous once documents are received by his office.
“You can trust what you see at the recorder’s office because it’s up to this date, everything is in order,” said Ott, “and you can’t see at MERS if it’s in order at all. That’s the scary part, and people’s homes are something you shouldn’t mess with.”

Default judgment • Keane said he’s been able to obtain quiet title in the same manner in two other cases. Another attorney, Abraham Bates, said he recently also won a quiet title action in a similar case in Salt Lake County.
In Bates’ case, a couple who owed $417,000 on a house whose value had dropped way below that also sued for quiet title.
He named the original lender and a title company listed as trustee on the trust deed. Because neither responded to the lawsuit as legally required, the judge granted the couple a default judgment that still must be verified in court, Bates said.
Bates said under Utah laws, it was not necessary to serve MERS legal papers, as it was not in the Draper townhouse case.
“MERS is not the beneficiary of the trust deed,” Bates said. “MERS did not make the mortgage loan.”

New questions • While these decisions stripped the owners of the promissory notes of the ability to foreclose on the property to recoup missed payments, it does not preclude them from suing the people who signed the notes to try to recover lost monies.
But that action would open up a new line of questions about the MERS method of property recording, said Christopher Peterson, a University of Utah law professor who has made a national name for himself recently by questioning the legal foundations of MERS’ appearance in property-recording records and its role in foreclosures.
Under laws adopted by all 50 states, the owner of a “negotiable instrument” such as a promissory note must be in physical possession of the document, said Peterson. Otherwise it would be like someone trying to cash a photocopy of a check instead of the actual check.
“One cannot be a holder of a note unless one is in physical possession of that note,” he said.
But Peterson said evidence is coming out in courts that shows the actual promissory notes or mortgages signed by buyers were not transferred as the notes made their way into the mortgage-backed securities investment pools.
That could mean in these cases that no one is in a position to try to collect because the actual notes are lost or destroyed, potentially making some promissory notes investors think they hold worthless.

Right to foreclose • Bates said he has more than 100 lawsuits pending over MERS-related questions and has hired more attorneys for his firm to handle the increasing load.
State courts have been more favorable than federal courts to homeowners seeking to halt foreclosure proceedings based on questions about MERS’ legal standing under state and federal laws, the attorneys say.
Rulings have gone different ways in different courts. But Bates said he and Peterson are teaming up to appeal a recent ruling by U.S. District Judge Tena Campbell that dismissed a lawsuit claiming MERS did not have the legal right to initiate foreclosure proceedings.
The attorneys are appealing Campell’s ruling as it relates to Utah law to the Utah Supreme Court. A decision will help sort out the issues with MERS over whether it actually can initiate foreclosures even if it does not have any financial interest in the promissory note, Bates said.
A ruling favorable to the homeowner “would be an absolute tsunami in terms of foreclosure in the state of Utah,” he said.
If MERS is not able to start a foreclosure action, “then there will be a brick wall put up over all nonjudicial foreclosures prosecuted in this state,” Bates said.

What is MERS?
The Mortgage Bankers Association created the Mortgage Electronic Registration Systems, or MERS, in the mid-1990s. It is a database that holds the names of the entities that have a financial interest in a particular mortgage, such as investment funds that bought bundles of mortgages called mortgage-backed securities. MERS is recorded on many property deeds of trust in Utah as the “beneficiary” of a loan taken out on a property even if that loan is sold and resold many times. MERS allows the actual loan owners to avoid paying fees every time a loan is sold.

24 Responses

  1. I foreclosed and won. There is no question who owns the property but it was discovered during foreclosure that the husband had not signed the contract. The couple who had to get out are mad and will not sign. I just need a signature to fix the title. Any ideas??

  2. MUST READ for California:

    Quiet Title Ruling Filed 2/14/13 Maconick v. Chase Home Finance


  3. I am interested in filiig for a quiet title on my property. How long does it take to file? What sort of pricing is involved?

  4. In CA, case law says mortgagor can not quiet title to property against mortgagee. BUT, the deal here is that we are quieting title against a purported assignee, not the mortgagee of record So its not disallowed. But in one case we are working on, the judge had a problem with this cause of action and we didnt want to deal with it, so we removed it as declaratory relief was enough. But technically seems you can press the issue. There is case law to support quieting against assignee.

  5. Has any of these mortgage companies successfully sued those who were able to get their homes through a Quiet Title law suit yet?

  6. zurenarrh,

    Yes — that is an argument. But, CA courts are relentless. If you do not pay — that is all they care about. Good argument — but some judges just do not care.

    Argument as to standing, document execution and validation, transfer of loan/mortgage, false affidavits, false testimonies, missing documents, missing ledgers etc etc. — is looking stronger and stronger. And, then you have counterclaims for fraud.

    Like all arguments — but have to back up and not get too detailed — as Utah case (I posted somewhere here) demonstrates. Have to show what you know — not speculate. Utah judge is sanctioning the attorney. Wrong — and believe the judge is not accurate on law as to John Does. But, my point is — need to show the fraud first – to get attention..

  7. Anon–you get around “not paid in full” argument by pointing out that lender HAS been paid in full by sale of note, yes? That’s all the deed of trust says–secures repayment to lender. If lender is repaid, then deed of trust is technically fulfilled. Have to check wording of each deed of trust, but I think that’s the gist of most of them…

  8. He’ll hath no fury lol

  9. Anon the house has become coincidental. It used to mean something to me. I’m
    more interesting I’m getting the bastards for what they did to me

  10. Yes anon and hsbc are pleading that in their claim to quiet title ( so they can get the lis pendens off and sell/ liquidate my house that they ” say” they own) and so deliver a purported clear title to some poor suckker and thus get insurance.., give me a minuite I’m thinking about something here that is how to get the judge to allow discovery of the how’s who’s and howcomes and no way around that …. Everyone question

  11. Just have problem with QT because judges kick out — if you are in default. Now, CA kicked out because the loan was not paid IN FULL.

    How do you get around this??

  12. Deb wynn,

    Good question. That is the fundamental question.

  13. Zoe, I do not think it matters, mostly, because the documents are usually fraudulent anyway.

  14. I mean who has the right to kick me out if my home aparently anybody that ” says” they are the beneficiary …. Question is ” how” did they become the beneficiary with rights to the receivable, what happens to the proceeds from the sake if my home when we have a question if standing to any claim on title. The question is not why should anyone get a free home but why shouldn’t the other party to that ( fraudulent) contract have the right to clear title when they signed that contract ( they did not if mers is involved) I believe I have the right to qestion who you really are regarding interest in the debt how you fit into the chain and how you came to have rights to the receivable just show me and you can take that house otherwise YOU whoever you are… should absolutely not be getting a free house. But the burden of proof is on the weaker party.

  15. That question haunts me. Who has the right to keep the proceeds

  16. Ok…….

    Dave Krieger…..please chime in on this one. I would love to hear your spin on this, especially if there are cons that will pop up regarding unamed parties after the fact.

    Can the QTA be undone or circumvented after the fact?


  17. Not to mention the Note became unsecured and is unenforceable as a secured debt; as well as the fact that the Note may have been destroyed by operation of law when it was permanently converted into “certificates” (the equivalent of shares of stock) in the mortgage-backed security pool.

    Consent cannot be gained through fraud.

  18. Jon,
    I’m just saying that some people hear “they won clean title!” and think “the debt is gone.” This impression is bolstered by the fact that in the Utah case the owner sold the property after getting QT and they kept the proceeds. They must assume no creditor will come after them, which is possible, but it is not something assured by the QT action.

  19. To Jack, We have never said that we would not pay they real creditor. The economy has backslided and the debtor should have the right to negotiate with all pre bubble creditors. It’s only fair!

  20. The obligation arose out of fraud in the inducment of the contract. Material misrepresentation. Lies and underwriting driven to create default

  21. Doing a quiet title against the lender who is on deed of trust (and no one else) simplifies the QT because the original lender is probably not the current creditor. So the original lender does not have any skin in the game. Why should they fight the QT on behalf of someone else? As we saw in Utah, they fold and you win the QT.

    But you still have a debt obligation under the note. You can be sued for those payments. If the creditor can prove the note, then you lose. If you stopped payments after the QT, you will likely owe interest on your payments if they win

    I know many will say “but the alleged creditor will not be able to prove they have the note, so they can’t sue.” Well if that is the case, then why not include them in the QT and get that issue resolved then?

    In my mind this Utah tactic improves your chances of clearing title, which is a good thing. But if you want to resolve whom you owe money to (if anyone), this tactic does not solve that. It seems better to me to have that issue resolved as part of a QT than to worry the creditor will come after you later on. How can you be sure that will not happen? Yes, they cannot foreclosure on you, but they can still come after your money.

    I’m happy to hear opposing thoughts on this.

  22. Does quiet title defense work only before MERS allegedly assigns the mortgage to the servicer just before the foreclosure is started?

  23. When congress held their mortgage servicing and home foreclosure hearings in the fall of 2010, several of the committee members would discuss their own experience with home mortgages.

    Many of their personal recollections had a familiar ring to them. They recalled how mortgage related paperwork was filed locally and…preserved locally.

    What the homeowner describe in the article is doing is keeping the responsibility of mortgage paperwork local.

    Local mortgage paperwork would be the most logical way for BOTH parties to meet their signed mortgage agreement, assuming BOTH parties have a local presence.

    Local presence for Local properties…hmmmm…it’s so revolutionary.

    If the mortgage paperwork is kept locally, then JOBS stay locally for the purposes of storage, filing, monitoring and reviewing anything to do with the mortgage.

    While some may argue that this will drive up the cost of mortgage paperwork in general, that is still probably a better alternative than having someone halfway around the world mistakenly foreclose on a paid off home, or simply not want to negotiate for the benefit of the homeowner and the surrounding community.

  24. […] This post was mentioned on Twitter by Teri Sherwood. Teri Sherwood said: #Quiet title may not be the answer for everyone but it can definitely work for some.: http://t.co/oAr2K8E #Foreclosure #Fraud […]

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